Big Corporations Embracing Microgrids: A Threat for Utilities?

SAN FRANCISCO --
Oracle Corp. Chief Executive Officer Larry Ellison plans to build one to power the Hawaiian island he bought last year. EBay Inc. has one to run a data center. The University of California at San Diego and the federal government have invested tens of millions of dollars in the technology.

Microgrids are emerging as a credible threat to the dominance of America’s 100-year-old-plus utility monopoly. The small-scale versions of centralized power systems, once just used against blackouts, are now gaining thousands of customers as homeowners in states with high power costs turn to them as a way to manage rooftop solar systems, cut electricity bills and, in some cases, say goodbye to their power companies.

The systems use computer software and remote measuring devices to control energy sources such as rooftop solar panels and natural gas-fueled power generators. They allow a home or business owner, a college systems engineer or a farmer on a mountainside to generate, distribute and regulate their locally produced power with an ease and sophistication that only utilities had a few years ago.

Not much of a factor a decade ago, microgrids are expected to explode into a $40 billion-a-year global business by 2020, according to Navigant Research, a clean-technology data and consulting company. In the U.S., about 6 gigawatts of electricity -- enough to power as many as 4.8 million homes -- will flow through microgrids by 2020, Navigant said.

Utility Leapfrog

“Microgrids are going from evolutionary to revolutionary,” said Jon Creyts, a program director at the Rocky Mountain Institute, a nonprofit energy and environmental think tank. While microgrids control a sliver of generation in relation to the overall grid, they are being built with a speed and projected scale that is cause for utilities to worry, according to Creyts.

In the developing world, they may leapfrog the need for conventional utilities -- the same way mobile phones leapfrogged the need for landlines -- and bring power almost half of the 1.3 billion people on Earth who don’t have it.

While the earliest microgrids controlled simple generator backup systems, they have evolved into sophisticated smart grids. Operators can remain tethered to the larger grid and switch seamlessly between the electricity they generate and utility power, whichever is cheaper. They can even sell surplus electricity back to the utilities through a process known as net metering.

If the main grid goes down, a flip of a switch or automated computer program deploys their mix of green energy, backup generators and storage batteries to keep the lights on.

Eating Revenue

Microgrids have the potential to radically change the U.S. electricity paradigm as they proliferate and begin to eat into the utility revenue stream. For example, U.C. San Diego saves an estimated $850,000 a month on its electricity bill by self- generating and using its microgrid to fine-tune campus power consumption.

The 3,200 U.S. utilities are already facing what NRG Energy Inc. CEO David Crane calls a “mortal threat” to the industry. Forces including deregulation, green politics and an explosion of rooftop solar and other homemade energy -- known as distributed generation -- mean a reduction in the fossil-fuel electricity utilities sell.

Microgrids may be the mechanism through which this revolution in clean distributed generation will be carried out - - a portal for leaving the traditional power grid.

Mixed Reaction

For utilities, which sell $400 billion worth of electricity a year delivered by 2.7 million miles (4.3 million kilometers) of power lines, the reaction is mixed.

In California, epicenter of the rooftop solar revolution, utility executives have begun to complain to regulators that microgrid operators who remain tied to power lines should shoulder some of the costs of keeping the grid stable, perhaps through connection fees. Sempra Energy and American Electric Power Co. are considering microgrid investments as a way to hedge the threat.

While only about 30 commercial-scale systems like those used by EBay and the U.S. Food and Drug Administration exist now, that number is projected to climb to 300 in just two years, said Steve Pullins, chief strategic officer for Green Energy Corp., a Tennessee-based builder of commercial-scale microgrids.

His company estimates that 24,000 U.S. commercial and industrial sites are ripe for large-scale microgrid conversions. Globally, about 400 additional big microgrid projects are under way. Lockheed Martin Corp. completed in May the U.S. Army’s first domestic microgrid at Fort Bliss in Texas. The military is already using them at sites in other countries to reduce fuel consumption.

Requests Increase

“We are seeing requests for proposals going up significantly, 30 to 40 percent higher than last year,” said Paul Orzeske, president of the Honeywell International Inc. unit that designs and builds commercial-scale microgrids. Honeywell built a $71 million microgrid for an FDA research center in Maryland and the agency is in the midst of a $213 million addition that will be online early next year.

On the consumer level, San Francisco-based Gen110, which installs leased microgrid systems with no out-of-pocket costs to homeowners, is attracting utility customers put off by tiered pricing that penalizes them when their use exceeds a certain level.

Gen110, which was acquired in September by franchiser Solar Universe Inc., harvests rooftop solar for its microgrids, then sells power back to its 6,000 customers at rates 10 percent to 30 percent below grid prices. Gen110’s users remain tethered to the grid, from which they draw about 10 percent of their power.

And then there are the CHP installations in the rocky mountain region (who would of thought), that accounts for about 174MW.

http://www.southwestchptap.org/states/wy/default.aspx

And then there all the oil refineries in Texas that use CHP in their own "microgrids" to keep the plants running...

No wonder the investor owned utilities are worried, demand for product is flat or dropping, major customers (military bases, refineries, universities) are adopting microgrids, residential customers are installing roof top solar, and the residential, commercial and industrial customers are all looking at implementing more energy efficiency improvements.

It is the end of October, Halloween is coming up and the monsters are knocking at the door of the utilities....

My offer to Larry Ellison - support my development and get my first 1GW microgrid system free plus funds you spent to support development and testing back.
I have developed device that converts deep water pressure (actually gravitation energy natural storage) into device shaft rotary motion and, when coupled with generator, produces base load electric power. This is true alternative energy (means fossil fuel free and also subsidy free).
Islands and ocean shore communities will be happy if you do this.

"In California, epicenter of the rooftop solar revolution, utility executives have begun to complain to regulators that microgrid operators who remain tied to power lines should shoulder some of the costs of keeping the grid stable, perhaps through connection fees." Really? They are already doing their bit for grid stability by taking a lot of their variable load and more importantly their peak load off of the grid. One can already calculate that their connection charges for distributed generation are much higher than what they obtain for distribution of other sources. The real problem is that distributed generation and now distributed distribution are real competition in a formerly uncompetitive / monopolistic market.

ANONYMOUS
October 23, 2013

Since when is Gen110 a "microgrid" provider? Looking at their website, and from what I know of them in the field, they just another residential solar installer with a lease or PPA option... big deal. They don't do anything different than SolarCity, Sungevity, Vivant, etc, etc. and their reputation is not great. They are a 2nd rate solar company that just got bought up by another 2nd rate solar company. I don't think the writers really did their research for this article.

Microgrids - you and your neighbors forming and owning an electric system, that you own and operate jointly. All benefits and expenses are shared by those who participate in the mircogrid. Sounds like an electric cooperative!

The sooner the utilities, unless they are state owned like in Nebraska, are priced out of the energy market, the better.

WHY? Because the utilities should never have been privatized in the first place. Most of the infrastructure for utilities, including super cheap give-away land right of ways and access to cheap financing and former government property during the first half of the 20th century was funded by WE-THE-PEOPLE and then the utilities became "private", ensuring a select few "investors", who had NOT footed the LION'S SHARE of the costs to build up the utility, proceeded to corner all the utility energy profits.

If you sell I-pods, that's a great business model but if you "sell" something that belongs to the commons, that is wrong.

Utilities should be returned to the commons, where they belong, or be eaten alive by the predatory corporations out there that the utilities have WRONGLY always sought to emulate.